corporate finance ch. 1

28 terms by thisnameistaken 

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capital budgeting

the process of planning and managing a firm's long-term investments.

capital structure

the mixture of debt and equity maintained by a firm

working capital

a firm's short term assets and liabilities

sole proprietorship

a business owned by a single individual

partnership

a business formed by two or more individuals or entities

corporation

a business created as a distinct legal entity owned by one or more individuals or entities

agency problem

the possibility of conflict of interest between the owners and management of the firm

stakeholder

someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

capital budgeting

what long term investments should the firm make?

capital structuring

how will this investment be financed?

working capital management

how will we manage the day-to-day financial activities?

what is the primary goal of financial management?

to maximize share value for shareholders

sarbox or sox

sets up compliance, driven by corporate scandals

sarbox or sox

created to minimize accounting fraud

sarbox or sox

intended to strengthen protection against accounting fraud and financial malpractice.

NASDAQ

digital stock

NYSE

physical stock

liquidity

speed and ease of conversion to cash without significant loss of value.

market value

________ ________ is more important than book value when making decisions

depreciation

loss of value

depreciation

_________ does not affect cash flow.

CFFA

cash flow from assets

OCF

operating cash flow

NCS

net capital spending

cash flow from assets =

cash flow to creditors + cash flow to stockholders

cash flow from assets =

OCF - net capital spending - change in NWC

OCF =

earnings before interest and taxes (EBIT) + depreciation - taxes

cash flow to stockholders

dividends paid - net new equity raised

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